11.3.22 NPLG: What Growth Investors Look For
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What Growth Investors Look For
As an early-stage investor (seed & series A), I spend a lot of time with growth investors helping the companies I work with raise their next rounds. I think of growth investors as Series B and beyond. At the Series B+ stage, many PLG companies are beginning to build sales teams to assist and accelerate growth. In my conversations with growth investors, it’s clear they are focused on identifying startups who have a repeatable GTM motion. This matters because if a growth investor gives a startup $50M, they want to predictably know how this new capital will translate into growth.
It goes without saying that growth investors look for the classic signs of PLG growth including user growth, engagement, and retention, but I wanted to share other non-obvious metrics that they are evaluating. Here are some of the metrics that matter:
net revenue retention of 120%+ (the most important metric)
sequential net new ARR growth quarter over quarter
sequential new logo count growth quarter over quarter
low customer concentration
50%+ of reps hitting quota
healthy distribution of reps contributing
I hope these metrics help early-stage PLG startups anticipate how growth investors will evaluate their startup.
I would love feedback. Please hit me up on twitter @zacharydewitt or email me at zach@wing.vc. If you were forwarded this email and are interested in getting a weekly update on the best PLG companies, please join our growing community by subscribing:
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Recent PLG Financings (Private Companies):
Seed:
bit.io, a shareable cloud database designed to store, query, and share data securely and reliably, has raised $7.5M. The round was led by GreatPoint Ventures and Battery Ventures, with participation from Neo and Combine.
Ciro, an operator of a go-to-market platform intended to achieve sales goals, has raised $3.8M. The round was led by CRV.
Impart, an API security collaboration platform intended to eliminate last-minute security patches, has raised $7.8M. The round was led by CRV, with participation from 8-Bit Capital, O'Reilly AlphaTech Ventures and Haystack Ventures.
Series A:
Fermyon Technologies, a developer of cloud tools designed to simplify and unlock new technologies for all, has raised $22M at a $87M at valuation. The round was led by Insight Partners, with participation from Amplify Partners.
Series B:
Merge, a startup that offers an API integration service with a focus on HR, CRM, ticketing and payroll and accounting systems, has raised $55M at a $315M valuation. The round was led by Accel, with participation from existing investors NEA and Addition.
Unito, a startup offering a service to bring together disparate SaaS platforms, has raised $20M. The round was led by CDPQ’s Equity 253 fund, with participation from Rainfall Ventures, Investissement Québec, Bessemer Venture Partners and Mistral Venture Partners.
WATI, a company that has customer sales and engagement tools created for WhatsApp, has raised $23M. The round was led by Tiger Global, with participation from Sequoia Capital India & Southeast Asia, and new investors DST Global Partners and Shopify.
Recent PLG Performance (Public Companies):
Financial data as of previous business day market close.
Best-in-Class PLG Benchmarking:
15 Highest PLG EV / NTM Multiples:
15 Biggest PLG Stock Gainers (1 month):
Complete Notorious PLG Dataset (click to zoom):
Note: TTM = Trailing Twelve Months; NTM = Next Twelve Months. Rule of 40 = TTM Revenue Growth % + FCF Margin %. GM-Adjusted CAC Payback = Change in Quarterly Revenue / (Gross Margin % * Prior Quarter Sales & Marketing Expense) * 12. Recent IPOs will have temporary “N/A”s as Wall Street Research has to wait to initiate converge.